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    891: How to Negotiate a Deal When It's Under Contract

    enFebruary 12, 2024

    Podcast Summary

    • Negotiations Under ContractUnderstand contract terms to effectively negotiate, potentially securing better deals during this stage of the buying process.

      Even after you've signed a real estate contract, negotiations can continue. Once an offer is accepted, the seller can counter with adjustments, and in today's market, sellers may even send out multiple counter offers. Buyers can respond with their highest price and best terms. It's essential to understand the contract's terms, including contingencies, earnest money deposits, and the escrow process, to effectively negotiate and potentially secure better deals. This episode of the Bigger Pockets Podcast with David Green and Rob Abasolo discusses the mechanics of negotiations under contract, providing valuable insights for both buyers and agents.

    • Negotiating the Deal in Real Estate: Leverage Shifts to the BuyerOnce an offer is accepted and deposit placed in escrow, buyers can leverage inspections and contingencies to negotiate price reductions or credits. Longer escrow periods increase negotiation power. For passive income, consider investing in a real estate fund or rent-to-retirement for no money down rental properties.

      The negotiation process in real estate begins in earnest once an offer has been accepted and the buyer's deposit has been placed in escrow. At this point, the leverage shifts from the seller to the buyer, who now has the legal right to buy the property and can use contingencies like inspections to put pressure on the seller to sweeten the deal. The longer the buyer is in the escrow period, the more likely they are to successfully negotiate for price reductions or credits. It's important for buyers to be aware of non-negotiables during home inspections and to understand the potential for regaining leverage in the process. For investors looking for passive income without the hassle of property management, investing in a private real estate fund like PPR Capital Management can provide steady monthly income with experienced teams and strong track records. And for those interested in buying rental properties with no money down, options like rent-to-retirement can make this a reality through discounted new construction properties and low-interest investor loans.

    • Negotiating repairs during due diligenceBuyers can negotiate repairs during due diligence. Focus on nonnegotiables like foundation issues and be resolute. Experienced investors learn to digest inspection reports and prioritize.

      During the due diligence period after an inspection, buyers may negotiate with sellers if they find significant issues like plumbing leaks, unsafe electrical problems, or foundation issues that require costly repairs. Sellers may need to fix these problems before the sale, give credits, or reduce the price. New investors should focus on nonnegotiables like significant foundation problems and be resolute on sellers addressing them before closing, unless the offer already includes the repair costs. Inspection reports can seem alarming, but experienced investors learn to digest them and understand what's truly important. BAM Capital, a trusted multifamily syndicator, offers accredited investors stable cash flow, capital preservation, long-term appreciation, and tax benefits through their disciplined investment strategy. For more information, visit bamcapital.com.

    • Home Inspections: Identifying Potential IssuesDuring home buying process, potential issues like roof deterioration, electrical hazards, plumbing leaks, foundation problems, and dry rot can lead to significant repair costs or make properties uninsurable. Buyers should communicate with inspectors to clarify concerns and seek professional advice to make informed decisions.

      During the home buying process, certain issues may arise during inspections that could lead to significant repair costs or even render the property uninsurable. These issues include a deteriorating roof, electrical hazards, plumbing leaks, foundation problems, and dry rot. It's essential for buyers to understand the severity of these problems and negotiate with sellers for repairs or concessions. Home inspectors, while expertly identifying potential issues, may exaggerate their significance to protect themselves from lawsuits. Buyers should communicate directly with inspectors to clarify concerns and seek professional advice to make informed decisions. Home inspections cover various aspects of a property, including electrical systems, plumbing, and structural integrity. Additionally, buyers should order separate pest inspections to identify termite infestations and dry rot. Ultimately, being aware of these potential issues and their implications can save buyers from unexpected costs and future headaches.

    • Prioritize repairs during home buying processDuring home buying, focus on major repairs, negotiate with seller, and consider repair costs or concessions.

      During a home buying process, it's essential to prioritize issues that require immediate attention and negotiate with the seller accordingly. Cosmetic issues, like a loose cabinet board or peeling linoleum, may not be deal-breakers and can be fixed later. However, significant problems, such as plumbing leaks or termite infestations, should be addressed with the seller. It's also crucial to consider the cost of repairs and whether it's more beneficial to take on the repairs yourself or ask for concessions from the seller. Additionally, it's best to avoid asking the seller to make repairs, as they may not do the work satisfactorily, and the buyer may end up unhappy with the results. Instead, the seller can provide a credit towards the buyer's closing costs, allowing the buyer to handle the repairs after the deal closes. Ultimately, prioritizing repairs, considering costs, and negotiating effectively can lead to a smoother home buying experience.

    • Seller's Obligation to Disclose Property IssuesSellers risk legal action if they fail to disclose known property issues. Disclosing issues upfront and providing inspections before contract signing encourages competitive offers and saves time and potential disputes.

      During a real estate transaction, sellers are required to disclose known defects or issues with the property to buyers. However, proving that the seller knew about the issue but failed to disclose it can be challenging for buyers. Once an inspection has been conducted, the seller's agent is obligated to share the results with the next buyer's agent. If the seller fails to disclose known issues, they risk legal action. A better negotiation strategy for sellers is to disclose all known issues upfront and provide inspections before the contract is signed. This approach removes the buyer's leverage and encourages competitive offers. Sellers who disclose issues and pay for inspections beforehand can save time and potential disputes in the long run.

    • Disclosing property information upfrontProviding potential buyers with all necessary disclosures and reports before they submit an offer can help prevent buyer's remorse and give sellers a stronger negotiation position.

      Providing potential homebuyers with all necessary disclosures and reports before they submit an offer can help prevent buyer's remorse and give sellers a stronger negotiation position. When buyers are excited about a property, they may write high offers without fully considering potential issues. However, if these issues are disclosed beforehand, buyers can make informed decisions and are less likely to back out of the deal. This not only saves time and resources for all parties involved but also reduces the likelihood of disputes and negotiations for concessions. By disclosing information upfront, sellers can ensure that buyers are making offers based on a clear understanding of the property's condition, leading to smoother transactions and fewer regrets.

    • Real estate negotiations involve concessions from both sidesSellers can price competitively and market effectively to maintain leverage, while buyers can request repairs or price reductions. Longer escrow processes favor buyers. eBay Motors ensures car parts fit with their Guaranteed Fit program, Quantum Fiber offers reliable internet services, and 1031 exchanges help investors defer taxes.

      During real estate negotiations, both buyers and sellers have room for concessions. Buyers may request repairs or price reductions, and sellers have the option to counteroffer or end the escrow and relist the property. However, the longer the escrow process drags on, the more leverage the buyer holds. For sellers, it's crucial to have a competitive listing price and effective marketing to attract multiple offers and maintain leverage in negotiations. Additionally, eBay Motors guarantees a perfect fit for car parts with their eBay Guaranteed Fit program, and Quantum Fiber Internet offers fast, reliable internet services for multifamily property owners, starting at $50 a month. 1031 exchanges, facilitated by First American Exchange Company, allow real estate investors to defer capital gains taxes while upgrading their investment properties. Remember, always consult with a financial, real estate, tax, or legal adviser for specific circumstances.

    • Negotiating Closing Cost Credits is More Beneficial Than Price ReductionsSellers often prefer to maintain listed prices, making closing cost credits a more appealing alternative for negotiation. This approach allows buyers to keep more cash on hand for future investments or property improvements, and can increase the likelihood of acceptance for investors.

      When negotiating with sellers during a real estate transaction, asking for closing cost credits is more beneficial than asking for a price reduction. Sellers often prefer to maintain the listed price of their property rather than reducing it, and offering closing cost credits can be more appealing to them. This approach also allows buyers to keep more cash on hand, which can be used for future investments or improvements to the property. Additionally, when making offers, framing the proposal as a higher offer with a significant closing cost credit can increase the likelihood of acceptance. This strategy can be particularly effective for investors looking to maximize their cash on cash or ROI.

    • Impact of a knowledgeable real estate agent on home purchase negotiationHaving an experienced agent can help buyers maximize benefits during home purchase negotiations by leveraging appraisal values, understanding contracts, and adapting to market conditions.

      Having a knowledgeable real estate agent can significantly impact the negotiation process during a home purchase. The appraisal value can provide leverage for buyers to negotiate price reductions or additional closing cost credits. Agents who understand the contract and the negotiation strategies can help buyers maximize their benefits. However, the market conditions also play a crucial role in the negotiation process. A strong market may limit the negotiation power, while a weaker market may provide more opportunities for price reductions or credits. It's essential to have an experienced agent who can navigate the negotiation process effectively and adapt to market conditions. The agent's role is vital in helping buyers make informed decisions and ensuring the best possible outcome in the transaction.

    • Maximizing negotiation advantages in real estateIn a buyer's market, use market knowledge to gain leverage and secure larger returns. During escrow, buyers can eliminate competition and gain advantage. Sellers should minimize buyer leverage beforehand. Effective negotiation strategies apply throughout the process.

      Understanding the market conditions is crucial for successful real estate negotiations. In a buyer's market, having this knowledge can lead to significant advantages, allowing for larger returns and more effective negotiations. Conversely, in a seller's market, the leverage is more limited, and the information may not save as much money. It's essential to recognize that negotiating effectively doesn't only apply before the contract is signed; it's equally important during the escrow period. As a buyer, aim to eliminate competition and gain leverage after the contract is in place. As a seller, focus on minimizing the buyer's leverage beforehand. Remember, before a house enters escrow, the seller holds all the cards. BiggerPockets Agent Finder can help you find an investor-friendly agent to guide you through the process, regardless of market conditions.

    • Connect with expert real estate agents for free investment guidanceUse BiggerPockets.com/deals to find local agents, analyze neighborhoods, and build confidence in making real estate investments. Remember, past performance isn't a guarantee, and consult advisors before investing, as investing involves risk.

      BiggerPockets.com/deals offers a free resource for those looking to invest in real estate by connecting them with investor-friendly local agents. By entering some details about what and where you want to buy, you can instantly match with an expert who can help navigate neighborhoods, analyze numbers, and build confidence in making a successful investment. Remember, past performance is not a guarantee of future results, and it's essential to consult with qualified advisors before investing. BiggerPockets.com/deals is a valuable tool for those on the path to financial freedom, but always keep in mind that investing involves risk, and only risk capital you can afford to lose.

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    971: BiggerNews: Mid-Year Housing Market Update + Mortgage Rate Forecast w/Redfin Chief Economist Daryl Fairweather
    We’re almost halfway through 2024, and the housing market is at a standstill. Mortgage rates are high, inventory is low, buyers have fewer choices, and many homeowners refuse to put their properties up for sale. But could things change in the second half of this year if interest rates fall and inventory improves, even if ever so slightly? We brought Redfin Chief Economist Daryl Fairweather on this BiggerNews episode to get her team’s latest 2024 housing market predictions. First, Daryl explains how our stubbornly strong economy put the Federal Reserve in a challenging position and whether or not we could hit the magic two-percent inflation rate goal. Will buyers ever get a break in this tough housing market, and could lower interest rates improve things? Daryl shares what she thinks will happen once the Fed finally cuts rates, how low rates could go, and whether or not this will heat home prices up yet again. Some “unusual demand” may come late this year for housing, but will agents, brokers, and sellers see the traditionally hot summer season they’ve been waiting for? We’re answering all these questions and more with this housing market data leader on this BiggerNews episode!  Support today’s show sponsor, Rent App: the free and easy way to collect rent! In This Episode We Cover 2024 housing market and mortgage rate predictions from Redfin’s Chief Economist  How our economy has stayed so stubbornly strong EVEN with rate hikes  Homeowner control and why buyers may be in an even worse position AFTER rates fall Improving housing inventory and what’s contributing the most to more homes on the market Why inflation may NOT need to hit the two-percent target for the Fed to lower rates The “lock-in effect” explained and why more homeowners with low rates could start selling And So Much More! (00:00) Intro (01:38) A Stubbornly Strong Economy (07:03) Housing Is STILL Hot? (13:23) Mortgage Rate Prediction ((18:29) Will Inflation Fall? (20:56) 2024 Predictions (23:53) An Opportunity for Investors Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-971 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

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    To get in touch with Denise:

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    Phone: 289-645-1568 ext 1